The Chamber of SMEs does not agree with artificial interventions in a free market economy, its CEO Abigail Agius Mamo said on the government’s price-stability assurance scheme on food prices.

Last week, the government launched a price-stability assurance scheme, which will see the price of 15 categories of imported basic food items reduce by a minimum of 15% below the Recommended Retail Price (RRP) as it was on 31 October 2023, in an agreement reached with importers and retailers of food products.

“The government has reemphasized that the intervention was not a result of issues related to excessive profiteering and therefore there is no justification of why this sector was forcefully asked to shoulder the burden of inflation,” Agius Mamo told The Malta Independent.

Prior to the government’s rolling out of this scheme the Malta Chamber of Commerce, Enterprise and Industry had also argued that price fixing is not a viable solution to the complex issue of inflation.

The Malta Chamber "reiterates its steadfast stance that the control and reduction of inflation should be the topmost priority to safeguard the competitiveness of the Maltese economy.  Fiscal policies that fuel inflation by stimulating demand, coupled with a lack of preparedness for the impact of EU policies impacting transportation costs are exacerbating the situation," it had said in a press statement.

The scheme, which will start on 1 February to give a period of adjustment for retailers, will run for over nine months until the Budget Day for 2025 next October. 

15 categories of staple foods which are most commonly consumed by Maltese population, and the ones which have increased the most in price, are included in the scheme, reaching up to approximately 400 products. 

The Chamber of SMEs told The Malta Independent that “the food sector is not the only sector that has been impacted by high prices, it is in fact the majority of sectors, and therefore singling out this sector is unfair. The government should think of long-term plans to protect Malta from inflationary pressures coming from abroad and therefore strengthen local production, with all efforts necessary, especially when it comes to the food sector.”

The SME Chamber also expressed disappointment in how talks were conducted and the difficult position the private operators were placed in.

Despite this Economy Minister Schembri said that there are currently over 200 outlets participating in this initiative, and government is also strongly encouraging importers and retailers who aren’t participating to join the initiative and apply. 

He added that this is “not a price-fixing exercise, but one in creating price stability on the most essential foodstuffs to mitigate against the impact of inflation on families,” describing it more as ‘price capping’.

He also said that discussions were done among the major importers and retailers in the country, whilst smaller retailers were all sent a letter in the mail explaining the process of applying for the initiative.

Contacted by this newspaper prior to the government’s announcement of the scheme, the Chamber of SMEs had described the approach as a very dated one “both in the way it has chosen to address the private operators on the matter and also the mechanism chosen, in order to price-fix certain food items.”

“Malta is import dependent and local operators have no leeway when prices increase from abroad. Malta's import dependency has long remained unaddressed. Over and above this, should the government believe that prices are being inflated artificially by local operators, these should be addressed using the proper legal routes and not place the burden on all the food operators. The cumulative ask by government on all food operators is unjustified and remained unexplained,” Agius Mamo said.

During his presentation minister Schembri had said that a fixed grant of €125 under certain terms and conditions will be given to smaller retailers as compensation for each month of their participation in the scheme, given to businesses not exceeding €800,000 in sales in the year 2022.

He said that according to the Eurostat, it is being forecasted that the inflation on food prices at a European level, which is currently 6.3% today, will decrease to 2.4% by the end of the year.

However, the Chamber of SMEs noted how the ETS will continue to inflate prices of imported goods for countries like Malta.

The EU ETS Directive on Shipping obliges ships to surrender so-called EUAs (Emission Unit Allowances) to compensate for the carbon they generate while under sail.

“The agreement the operators are being pressured to sign does not cater for such circumstances since prices will be fixed for a number of months, independently to how their prices at source will be fluctuating,” she said.

Moreover the Chamber of SMEs said that the repercussions this government measure will cause will see other items to increase in price to make up for the loss and for small retail businesses to become uncompetitive as they will not have the cost for such products reduced by suppliers, being that they are not covered by the agreement.

“Messing with free market operations is highly undesirable and will have its repercussions.”